Belt Tightening or Belt Notching?

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Has the economy put an end to brand loyalty? Prompted by the ever-rising costs of most consumer products, many Americans are changing their purchasing habits and abandoning name-brand products for the more frugal (lower priced) house and generic brands. With the Bureau of Labor Statistics reporting a rise in consumer prices of 7.8 percent in the last 24 months, American consumers are under increasing pressure to modify their buying habits. The move to buy “cheaper” is most evident in the sales of everyday consumables like paper and cleaning products but has also crossed over into previously unaffected premium goods such as makeup, gourmet and prepared foods, and trips to spas/hair salons.

Retailers are sensing more shopper experimentation. Supermarket giants Safeway and Kroger have reported rising sales of their store brands. While the sales of name-brand products still exceed those of store brands, a report by market research company Mintel International indicates that 40 percent of primary household shoppers surveyed stated they have started purchasing store brands because they are cheaper than national brands. Twenty-five percent of the respondents reported it’s tough to tell the difference between national brands and store brands of most everyday consumables. Even one of the most brand-loyal product categories, laundry detergent and softeners, is showing signs of the change in consumer purchasing habits. In the 52-week period ending in September 2008, sales of private-label detergent rose 12 percent. Sales of value-oriented fabric softener Purex rose more than 60 percent.

A Closing Income Gap

Up until now, most of the spending cutbacks have been by consumers with incomes under $100,000. The change in purchasing habits may now be spilling over to consumers with incomes over $100,000. “Shopper in Crisis,” a new survey by Information Resources, found that 41 percent of upper-income consumers have reduced spending on nonessential groceries, and a quarter of these same consumers said they have given up a favorite brand. One third of those surveyed said they bought more private-label products.

These ritual changes are happening much faster and are much deeper than those experienced during previous economic downturns. Nearly 50 percent of consumers surveyed said they went to spas and salons less often and were doing more beauty treatments at home. The change in shoppers’ habits also has prompted a change in advertising and marketing. Because more buying decisions are being made in-store, where price comparisons are evident, large marketers like Procter & Gamble are placing more emphasis on in-store promotions to win over the cost-conscious consumer.

So what does all this mean for marketers of ornamental plants? The industry has always believed that our products were more recession proof than most items consumers spend discretionary dollars on. The general thought was that consumers would forgo expensive vacations and major capital purchases while spending more time at home. This behavior would then lead to ornamental plant purchases to make the home environment more pleasing and the increased time at home more enjoyable. This spring season will certainly test this commonly held theory. How will “premium” plant brands fare? Will there be a shift to more value-priced container sizes?